A Look at QAF’s 2Q Results

QAF logo QAF Limited (SGX: Q01), the maker of Gardenia bread, posted a revenue increase of 6% to $259.2 million for its second quarter of 2013 (2Q 2013) over 2Q 2012. QAF operates three business segments – Bakery, Primary Production and Trading & Logistics – and all saw an increase in sales.

However, its net profit plunged 65% or $3.5 million for the quarter as compared to the previous year. For the first-half year of 2013 (1H 2013), revenue went up 5% to $510.0 million while net profit was down 27% to $15.5 million over 1H 2012.

Group revenue increased by 5% to $510.0 million for the first half year ended 30 June 2013 (‘1H 2013’) from $484.5 million for the first half year ended 30 June 2012 (‘1H 2012’).

The gross profit margin for 1H 2013 decreased to 45.9% from 48.1% in 1H 2012. The decrease in margin was due to Rivalea (Australia) Pty Ltd, QAF’s fully integrated producer of meat located in Australia, facing higher cost of animal feed and grain as well as the higher cost of ingredients faced by the Bakery operations.

The main cause for the decrease in profit was because QAF made a “provision for an unrealised foreign exchange loss of $3.4 million pertaining to the depreciation of the Group’s Australian dollar denominated assets against the Singapore dollar in 1H 2013 as compared to that of 1H 2012”.

The net profit margin for 1H 2013 was at 2.9% while that in 1H 2012 was one percentage point higher at 3.9%.

The total borrowings of QAF stands at $103.2 million as of 30 June 2013. The net cash flow from operations for 2Q 2013 was at $14.0 million while that for 2Q 2012 was at $30.4 million. The huge decrease was mainly due to working capital changes.

The outlook for financial year ending 2013 seems bright. It said, “Group revenue is expected to increase for the financial year ending 31 December 2013 (‘FYE 2013’) as compared to the financial year ended 31 December 2012. The Group expects to continue facing relatively high raw material and other operating costs for the second half of the financial year ending 31 December 2013. Despite this, the Group expects to achieve an encouraging level of profitability in FYE 2013.”

Even the profits plunged for 1H 2013, the company has declared an interim dividend of 1.0 Singapore cents, unchanged from 2Q 2012. The shares closed at $1.025 on 12th August 2013.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.